Developing an Internet Business Plan*
If you are interested in developing a new business on the Internet or expanding
your current business onto the global information superhighway, it is important
to develop a business plan as part of your preparations. Like a regular business
plan, your Internet business plan must give details of the proposed venture,
along with expected needs and results (Kuratko and Hodgetts, 1992). In addition,
it must take into account the unique nature of electronic commerce.
The plan can represent two different types of ventures:
- A new entrepreneurial venture (e-business startup), where the audience
would be a lender or investor.
- An e-business segment of a conventional "brick & mortar"
business, where the audience would be a corporate sponsor.
Purpose of a Business Plan
A business plan is designed to convince the reader to support the proposed
project. Besides support from investors or corporate sponsors, the plan also has
another purpose: to force the entrepreneur to do thorough and effective
Internet Business Issues
Electronic commerce on the Internet is relatively new and poses many unique
challenges. First, most people do not know exactly what the Internet is or what
it can offer businesses. This is a hurdle that must be overcome in your business
plan. Second, resources that are taken for granted in the real world often do
not exist or are in formative stages in the on-line world. For example, payment
systems, ad page pricing, and market demographic tracking are all in various
stages of development on-line. Third, the pace on the Internet is dizzying.
Keeping track of the rapidly changing trends, technology, and competitors is
crucial to the success of your business.
How Much Work is it?
Just like in any endeavor, you would not make substantial investments without
careful research and understanding of what you are doing. Two good examples are
"RockClimbOnline" and "WoodstockMotors.co.uk," posted at www.bplans.com.
To my knowledge, this is the only site offering a variety of real business plans
free, on line. You can judge the effort required to put together a plan that
builds a significant business case. The plans at bplans.com are realistic, but
ours will be more segmented.
Ten Sections of an Internet Business Plan
All but #5 and #6 are required for our course.
Note: Pay most attention to #3, #8, #9, the major grading points
- Executive Summary (required): This section must concisely
communicate the basics of your entire business plan. Keep in mind that your
reader may be unfamiliar with the Internet and its tremendous potential.
- Business Description (required): In this section discuss
your firm's product or service along with information about the industry. Describe
how your product and the Internet fit together or complement each other.
- Marketing Plan (required): With the business described, next
you must discuss your target market, identify competitors, describe product
advertising, explain product pricing, and discuss delivery and payment
Research & Development (required): This is where to get
into the technical aspects of your project. Address where the project is
now, the R&D efforts that will be required to bring it to completion,
and a forecast of how much the project will cost. Since the Internet is
continually developing, you should also address continuing plans for
Operations & Manufacturing (not
required): In this section, discuss the major aspects of the business,
including daily operations and physical location. Also, what equipment will
your business require? Will you be using your own Web server, or will you be
contracting with another company? Who will be your employees -- will you
hire Internet knowledgeable staff, or train them in-house? Be sure to
include cost information.
Management (not required): This
segment must address who will be running the business and their expertise.
Because the business centers around the Internet, be sure to discuss the
management team's level of Internet expertise and where they gained it.
Also, describe your role in the business.
Risks (required): In this section, you must define the major
risks facing the proposed business. In addition to regular business risks
such as downward industry trends, cost overruns, and unexpected entry of
competitors, also include risks specific to the Internet. For example, be
sure to address the issues of computer viruses, hacker intrusions, and
unfavorable new policies or legislation.
Financial (required): Potential investors will pay close
attention to this area, since it is a forecast of profitability. As in a
regular business plan, include all pertinent financial statements. Remember
to highlight the low expenses associated with operating on the Internet
compared to those of other business.
Timeline (required): In this section, you must lay out the
steps it will take to make your proposal a reality. When developing this
schedule, it might be helpful to talk to other Internet businesses to get an
idea of how long their Internet presences took to establish.
Bibliography and Appendices (required):
Cite your sources! Long quotes are perfectly acceptable, as long as they are
marked and citations provided.
|Customers: You must define who your customers are and how many
of them exist on the Internet. An analysis of the customer base should
not be a casual guess.
|Competitors: Use Internet search engines to look for known
competitors or similar products to yours. Be sure to use several search
engines, because each uses different search techniques. Before your
presentation, look again. All major direct competitors should be found
and analyzed in your product. Remember, readers of your business plan
will be very interested in how you are going to beat the competition.
|Advertising: Describe how you are going to tell the Internet
community about your product or service. Designing beautiful Web pages
is only a first step. You must also get the word out about your Web
site. Some tips: detail a plan to add your Web address to the databases
of search engines, add it to the bottom of all of your e-mail messages,
and perhaps create physical novelties for local customers.
|Pricing: How are you setting prices for your products or
services? If your product is intangible information delivered over the
Internet, you should try to create some sort of pricing model to justify
your prices. You could start by researching what others are charging for
|Delivery & Payment: How are you going to deliver your
product and get paid? E-mail alone is not secure. Consider encryption
techniques and on-line payment services.|
You should now have a better idea of what is involved in developing a winning
Internet business plan. Remember, the most important points are: addressing the
uniqueness of the Internet, explaining its business advantages and potential,
and keeping your audience in mind. For further information, the following two
sources may be helpful.
Kuratko, Donald F., and Hodgetts, Richard M. Entrepreneurship: A Contemporary
Approach, Dryden Press, 1992.
Resnick, Rosalind, and Taylor, Dave. The Internet Business Guide: Riding the
Information Superhighway to Profit, SAMS Publishing, 1994
* Adapted from a document by Michael Yellin, MBA/MS-MoIS Student